International Banking and Liquidity Allocation

Dietrich, Diemo; Vollmer, Uwe

doi:10.1007/s10693-009-0074-7

Cited by 14 publications

(6 citation statements)

References 31 publications

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“…Typically, local banks have informational advantages over foreign banks, which would face adverse selection problems that leave them with a pool of the least creditworthy or even unworthy borrowers. In those environments, entry by foreign banks in regional loan markets can reduce the screening incentives for banks through increased competition (Gehrig 1998) or imply a lower resilience of foreign banks to liquidity shocks (Dietrich and Vollmer 2010).…”

Section: Overview Of the Environmentmentioning

confidence: 99%

Interbank borrowing and lending between financially constrained banks

Dietrich

Hauck

2019

Econ Theory

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Some stylized facts about transactions among banks are not easily reconciled with coinsurance of short-term liquidity risks. In our model, interbank markets play a different role. We argue that lending to another bank can reduce a bank's overall portfolio risk through diversification. If insolvency is costly, this diversification improves the interbank lender's funding liquidity, boosting credit supply to nonbanks. However, diversification comes at an endogenous cost that depends on bank-specific factors of interbank borrower and lender. The model provides a framework for understanding the importance of interbank lending for aggregate credit supply and the stability of banking systems. The model's predictions are consistent with evidence documented in the literature that other theories cannot consistently explain.

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Section: Overview Of the Environmentmentioning

confidence: 99%

Interbank borrowing and lending between financially constrained banks

Dietrich

Hauck

2019

Econ Theory

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“…7 See Dietrich and Vollmer (2010). This is an Accepted Manuscript of a forthcoming article by Emerald in Qualitative Research in Accounting & Management.…”

Section: Data Data Collection and Analysismentioning

confidence: 99%

The importance of trust for inter-organizational relationships

Rad

2017

QRAM

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Purpose-This paper examines interbank market practices in a crisis in order to understand the importance of trust in dealing with control problems and managing risk in inter-organizational relationships. Design/methodology/approach-A qualitative field study was conducted to collect data from two case-study banks and two key banking industry institutions. Findings-The findings illustrate the use of trust-based partner-selection criteria such as guaranteed banks (i.e. banks granted special status by key banking industry institutions) and "clan-related" banks. In addition, the findings present several trust-based performance-control processes regarding the selected counterparties, such as negative expectations, goodwill, and information sharing. Theoretical implications-This paper highlights inter-organizational relationships and considers how associated control problems and risks are affected by trust in the context of a large-scale crisis. Practical implications-The findings provide insights into interbank market practices during the global financial crisis with respect to partner selection and performance control. Originality/value-The empirical case of the banking industry helps broaden our understanding of inter-organizational relationships.

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“…See De Blas and Russ (2013) for a theoretical analysis of banks' internationalization choices;Buch et al (2011) for an empirical analysis using German data. Buch and DeLong (2012) provide a comprehensive survey of literature on cross-border bank mergers.6 See alsoAcharya et al (2013) orDietrich and Vollmer (2010).…”

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confidence: 99%

International Banking and Liquidity Risk Transmission: Lessons from Across Countries

Buch¹,

Goldberg²

2015

IMF Econ Rev

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Activities of international banks have been at the core of discussions on the causes and effects of the international financial crisis. Yet we know little about the actual magnitudes and mechanisms for transmission of liquidity shocks through international banks, including the reasons for heterogeneity in transmission across banks. The International Banking Research Network, established in 2012, brings together researchers from around the world with access to micro-level data on individual banks to analyze issues pertaining to global banks. This paper summarizes the common methodology and results of empirical studies conducted in eleven countries to explore liquidity risk transmission. Among the main results is, first, that explanatory power of the empirical model is higher for domestic lending than for international lending. Second, how liquidity risk affects bank lending depends on whether the banks are drawing on official-sector liquidity facilities. Third, liquidity management across global banks can be important for liquidity risk transmission into lending. Fourth, there is substantial heterogeneity in the balance sheet characteristics that affect banks' responses to liquidity risk. Overall, balance sheet characteristics of banks matter for differentiating their lending responses, mainly in the realm of cross-border lending.

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International Banking and Liquidity Allocation

Abstract: Financial integration, International banking, Capital regulation, Foreign direct investment, Incomplete contracts, G21, G28, F36, F23,

Cited by 14 publications

References 31 publications

Interbank borrowing and lending between financially constrained banks

Interbank borrowing and lending between financially constrained banks

The importance of trust for inter-organizational relationships

International Banking and Liquidity Risk Transmission: Lessons from Across Countries

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